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HomeMarketDown 30% in 3 months, is the Taylor Wimpey share value too...

Down 30% in 3 months, is the Taylor Wimpey share value too low-cost for me to disregard?

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Picture supply: Getty Photographs

Since 19 September, housebuilder Taylor Wimpey (LSE: TW) has seen its share value fall by over 30%.

Why have the shares slumped? One apparent rationalization could be that the FTSE 100 firm’s buying and selling has upset buyers. However this hasn’t occurred.

Buying and selling as anticipated

Taylor Wimpey’s latest 2024 buying and selling replace confirmed that earnings for final yr needs to be “in line with previous guidance”. And 2025 appears to have gotten off to an inexpensive begin too. Taylor Wimpey’s order e book stood at £1,995m on the finish of December, 12.5% larger than the £1,772m reported on the finish of 2023.

The corporate expects to report a rise in completions this yr – though weaker pricing within the South of England does imply that the typical home value within the order e book is 0.5% decrease than final yr.

This could be one cause for the latest weak spot, however this replace was solely issued on 16 January 2025. It doesn’t clarify final yr’s stoop.

Market headwinds?

My guess is that buyers had been hoping the federal government would come with some type of money bung to spice up housing exercise with the autumn Price range. Buyers might keep in mind how the Assist to Purchase scheme turbocharged home costs for a number of years. Because it occurs, the one promise we’ve bought from the federal government to this point is that it’ll attempt to unclog the planning system.

One different potential headwind is that rates of interest aren’t falling as quick as anticipated. This has a direct influence on mortgage charges and affordability. That raises the danger of additional strain on home costs.

Is the 8% dividend yield protected?

I feel it is a good instance of the outdated inventory market adage “buy the rumour, sell the news”.

Shares in Taylor Wimpey and different housebuilders carried out very properly forward of October’s Price range. However when the precise information emerged (there wasn’t any), buyers took earnings. This unload has left Taylor Wimpey shares buying and selling barely beneath their June 2024 e book worth of 125p. That’s a standard signal of worth for a housebuilders.

I’m additionally tempted by the 8% forecast dividend yield. Nonetheless, I’m a bit involved that the forecast payout of 9.4p isn’t totally lined by anticipated 2024 earnings of 8.2p.

Taylor Wimpey ended final yr with internet money of £565m and will in all probability afford to keep up the dividend. Nonetheless, administration received’t essentially need to do that. It might need to protect money in order that it could actually increase its construct price if market circumstances enhance.

What’s extra, CEO Jennie Daly already has a get-out-of-jail-free card for a dividend lower. Her earlier steerage on dividends implied that the payout might fall to a minimal of seven.1p per share, if wanted. That may give the inventory a extra regular 6.1% yield.

My verdict

Proper now, I’m on the fence about Taylor Wimpey. I feel there’s an opportunity the inventory’s grow to be attractively valued. However I don’t really feel it’s undoubtedly too low-cost to disregard. I’m additionally barely anxious concerning the security of the dividend.

For these causes, I’m going to attend till the corporate’s outcomes are revealed in February earlier than revisiting this example.

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